December 16th, 2008
06:09 PM ET

Madoff scandal: Did the SEC blow it?

Editor's Note: These are quick notes from Fortune Magazine Managing Editor Andy Serwer. See Andy's full report on AC360° tonight at 10pm ET.

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2008/images/12/16/art.bernie.madoff.jpg caption="Bernard Madoff leaving his home on Dec. 15, 2008."]

Andy Serwer
Managing editor FORTUNE

  • It’s unclear how many times the SEC was flagged but it was flagged more than once on Madoff and took no enforcement action. This is not a small thing – the SEC has gone after smaller operations and closed them down. There are some suggestions that Madoff was friendly with people in the SEC and it's unassailably true that because he was a former NASDAQ chairman, it could have predisposed people to say that this guy couldn’t have been bad.
  • As far as smaller operations, the SEC spent a lot of time and money going after Mark Cuban for insider trading. It's a tiny amount – he avoided losses of $750,000. I'm not saying what Mark Cuban did was right but it's ridiculous that they're spending time and money going after this guy for $750k but were flagged numerous times essentially on one of their own and really did nothing. They spent countless man hours on Cuban and partly it’s because he’s an outsider to Wall Street and not liked by a lot of people in general because he’s brash, etc.
  • Every scandal is the same and every scandal is different. This is the Mother of all scandals. True to form, Madoff seems to be wrong even on how much money is lost because he said $50 billion and it's probably more like $20 billion. He couldn't even tell the truth about how much money was stolen.
  • Wall Street never learns. The bull market brings out the crooks and the bear market is when they get caught. What happens in a ponzi scheme, people start pulling money out and you can't get new investors and the house falls apart.
  • Fortune.com has another story about a guy named Richard Whitney. In 1929, he served for 5 years as President of NYSE, supposedly halted panic in the 1929 crash and ended up being guilty of fraud. In other words, he was part of the club on Wall Street and not guarding hen house, he was stealing from it.
  • I actually talked to a shrink about Madoff today and the shrink said 3 things: 1. He's narcissistic; 2. He suffers from delusions of grandeur; 3. He was psychopath.
  • He's a very peculiar person. Usually these people prey on people they don't know. He preyed on weakest people in society and went after charities of people he believed in. He may have fallen into this. He probably got behind one quarter and he fudged some figures to cover it and it snow-balled. He might not have started out as a crook but turned that way.
  • How did he fool investors? Same thing that fooled the SEC, fooled investors. People said this is a former NASDAQ chairman, returns are good but not through the moon. His returns were just good enough to be a good investment but not so much to be implausible.

See all of Andy's columns at Fortune.com.

Filed under: Andy Serwer • Finance
soundoff (3 Responses)
  1. Gene Penszynski from Vermont

    P.S. For all their talk about Patriotism people like Rush Limbaugh and his supporters would sell this nation to the hihgest bidder in a heartbeat. Keep waving your flags in your meaningless gestures you traitors !

    December 16, 2008 at 6:29 pm |
  2. Gene Penszynski from Vermont

    Wall Street under G W Bush has absolutely NO SOCIAL CONCIOUS WHAT SO EVER. It is driven ENTIRELY by PUR UNADULTERATED GREED. What do you ecpect for God's sake !

    If this is 'THE NEW NEO-CON CAPITALISM' I'll take socialism any day of the week !!!!!!!!

    December 16, 2008 at 6:18 pm |
  3. Brandi - bottom of the boot

    i think the SEC is responsible for most of the money that has been lost. if they had any idea of impropriety, they should have acted or at least warned investors in some way.

    they should pay these people back their money, after all, its no where near the bail out amounts they have been handing out.

    December 16, 2008 at 6:17 pm |